Zions Bancorporation
Annual Report 2023

Plain-text annual report

DEE PLY ROOTED A N N U A L R E P O R T 2 0 2 3 A COL LEC TION OF GRE AT BANKS Zions Bancorporation is comprised of a collection of extraordinary, locally led and community-focused banks serving businesses, households and local governments in some of the best growth markets in the nation. We’re determined to help build strong, successful communities, create economic opportunity and help our clients achieve greater financial strength through the relationships we develop and the services we provide. $14.3B average loans $888M total net revenue $20.2B average deposits Salt Lake City, UT $14.1B average loans $714M total net revenue $14.3B average deposits San Diego, CA $12.9B average loans $637M total net revenue $13.6B average deposits Houston, TX $5.3B average loans $300M total net revenue $7.0B average deposits Phoenix, AZ $3.4B average loans $236M total net revenue $7.0B average deposits Las Vegas, NV $4.0B average loans $178M total net revenue $3.5B average deposits Denver, CO $1.7B average loans $67M total net revenue $1.2B average deposits Seattle, WA 01 ANNUAL REPORT | 2023PE RFORMANCE AT A GLANCE 02 ZIONS BANCORPORATIONEARNINGS PER SHARE Annual earnings per share over the past five years $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 6.79 5.79 4.35 4.16 3.02 2019 2020 2021 2022 2023 EARNINGS PER SHARE Growth in earnings per share indexed to 2018 180 160 140 120 100 80 60 40 20 0 Indexed: 2018 = 100 2018 2019 ZION 2020 2021 2022 2023 Peer Top Quartile Peer Bottom Quartile PRE-PROVISION NET REVENUE LESS NET CHARGE-OFFS (PERCENT OF RISK WEIGHTED ASSETS) 5-year average, 2019-2023 Peer Banks: Strongest Quartile 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 1.9% Peer Banks: Weakest Quartile 03 ANNUAL REPORT | 2023“ THE STRENGTH THAT COMES FROM OUR LONG HISTORY, AND FROM BUILDING OUR BUSINESS THE RIGHT WAY, MAKING LONG-TERM INVESTMENTS IN BOTH PEOPLE AND TECHNOLOGY, WILL SERVE US WELL FOR MANY YEARS TO COME. “ 04 ZIONS BANCORPORATIONTO OUR SHAREHOLDERS CH AI R MAN’S ME SSAGE In my letter a year ago, I wrote about of 2023 was precipitated by rapidly the investments we’ve made and the rising interest rates and the impact efforts we’ve undertaken in recent of those rates on banks’ balance years to help ensure the resilience of sheets after more than a decade of our company during periods of great virtually free money. stress. Those preparations were put to the test in 2023, which was a year In the end, Zions Bancorporation’s unlike any other since the financial long history, our conservative growth, crisis, and a year in which we were our relatively granular deposit base, once again reminded of the funda- the strong relationships we have mental fragility of a fractional reserve with our customers, and the deep banking system. Unlike the 2008-9 roots we have in the communities financial crisis, the origins of which we serve, proved to be critically were found in steep credit losses important factors in our ability to across the industry, the bank crisis navigate the storm. HARRI S SI MMONS Chairman and CEO 05 ANNUAL REPORT | 2023T HE SP RI NG 20 23 B AN K ING CRIS IS We entered the year expecting These bank failures precipitated it would be one of outstanding substantial funding challenges for a financial performance. Our primary number of regional banks as many source of revenue is the interest large, uninsured depositors reflexively income derived from the earnings sought the perceived safety of moving assets on our balance sheet, less their money into money center banks the interest expense we pay for considered “too big to fail.” During funding those assets. The net of those the first quarter of 2023, our total amounts, expressed as a percent- “customer deposits,” which exclude age of our average earning assets, any brokered deposits, decreased by constitutes our net interest margin. $7 billion, or 9.8%, from their year-end As we concluded 2022, that margin 2022 level. Over 85% of that decrease was 3.53%, and we expected it would occurred in accounts with balances of remain reasonably stable at that level over $1 million, constituting approxi- over the course of the ensuing year. mately 20% of the beginning balances Events in early March upended those in those accounts. We immediately expectations, as a depositor “run” on replaced these funds with a combi- California-based Silicon Valley Bank nation of repurchase agreements, that began on March 9 led to the advances from the Federal Home Loan rapid collapse of that bank, followed Bank system, and brokered deposits. the same weekend by the closure We had both the available liquidity, of Signature Bank in New York, and through the repo market and borrow- several weeks later the seizure and ing arrangements with the Federal sale of First Republic Bank, headquar- Reserve and the Federal Home Loan tered in San Francisco. Bank, and the mechanisms, which 06 ZIONS BANCORPORATION07 ANNUAL REPORT | 2023we test frequently, to immediately Another cost arising from the crisis Silicon Valley Bank, Signature Bank, respond to a liquidity crisis, and we was a special assessment imposed and First Republic Bank all had continue to have those safeguards by the FDIC on all banks with total some common threads that should in place today. assets greater than $5 billion. Zions have signaled higher levels of risk to Bancorporation’s share of this management teams and regulators. Over the balance of the year, as assessment was $90 million. Curi- The three banks had growth rates confidence in the banking system was ously, this special assessment was that were respectively 8.7, 4.3, and reestablished, we increased customer based on each bank’s total uninsured 3.9 times higher than the growth deposits by $6.7 billion, overcom- deposits on December 31, 2022 — in average industry assets during ing the outflow we experienced before the crisis and the migration the five-year period preceding their following the bank failures, while at of a substantial volume of uninsured failures. They had concentrated the same time reducing the combi- deposits to the very largest banks — business models that focused on nation of brokered deposits and as opposed to basing the assessment a narrow set of clients, and with a short-term borrowings by $2.5 billion on the deposits that remained at the reasonably narrow set of products. from their levels at the beginning end of March 2023. For that matter, One result was that they all had much of the year. This all came at a cost, the FDIC may be the only insurance larger average deposit balances per however, as it precipitated a much organization in the world that account, and much lower levels of more rapid increase in deposit costs assesses premiums based on what insured deposits, than is typical in the than had been anticipated at the it doesn’t, rather than what it does, banking industry. beginning of the year, with the net insure — perhaps a sign that the insur- interest margin stabilizing at just over ance framework, and the concept of Silicon Valley Bank, in particular, had 2.90% in the second through fourth “too big to fail” institutions, is deserv- become a major “outlier,” with an quarters of the year. ing of a great deal more thought. average deposit account size some 08 ZIONS BANCORPORATION20 times larger than that at Zions this, Congress seems to be in no mood Bancorporation, and with uninsured to revisit deposit insurance levels at deposits comprising approximately present, though it is perhaps as press- 94% of total deposits, compared ing an issue as any in the banking to our 53% at the beginning of the industry, and particularly for smaller year — almost exactly the same as banks. Since the insured deposit the median for our peer group. First threshold was last raised to $250,000 Republic Bank and Signature Bank in 2008, the real value of insurance likewise had average deposit sizes of coverage has eroded by 30% due roughly four to nine times the size of to inflation. Had the insurance level an account at Zions, and uninsured grown at the same pace as per capita deposits that comprised approxi- gross domestic product since deposit mately 67% and 90%, respectively, at insurance was first introduced in the the two banks. amount of $2,500 in 1934, the insured deposit amount would today be These bank failures should have about $386,000. produced a watershed moment for policymakers — most all of whom In the absence of a change in deposit proclaim their strong support for a insurance thresholds, many banks, diversified banking industry compr- including Zions, have increased their ised of community, regional and usage of reciprocal deposit arrange- money center banks — to consider the ments to effectively divide some of increasingly important role federal our larger clients’ accounts into smaller deposit insurance — which is not pieces that can be parceled out to indexed for inflation — plays in an other banks, receiving reciprocal industry where a handful of players deposits on our balance sheet from are deemed “too big to fail.” Despite the same banks. It’s a relatively convo- the fact that many seem to believe luted, but effective, way to achieve federal deposit insurance is paid for higher amounts of insurance coverage, by taxpayers, its cost is, and has and another reason Congress should always been, borne by banks. Despite act to address the underlying need. LOANS, AS A PERCENT OF DEPOSITS At December 31, 2023 Peer Banks: Weakest Quartile 100% 90% 80% 70% 60% 50% 77% Peer Banks: Strongest Quartile 09 ANNUAL REPORT | 202310 ZIONS BANCORPORATIONT HE R EGULATORY E NVI RONMEN T Instead of reforms that target the The Basel III Endgame proposal proximate cause of the 2023 banking would incentivize banks to hold fewer crisis, regulators have proposed securities categorized as “Avail- rules that threaten to impair banks’ able-for-Sale,” and would likewise competitiveness and increase the cost encourage banks to hold securities of doing business. One commentator with shorter maturities or variable suggested that it’s almost as though interest rates, which may not match one had gone to the hospital with a the expected behavior of the deposits broken wrist and been discharged that fund them. The expected result with a knee replacement. Though may be more volatility in a bank’s some of the more significant of these net interest income. Other elements proposed rules target banks with over of the proposed rule would penalize $100 billion in total assets, we are lower income borrowers and small very focused on them inasmuch as we businesses, by increasing the expect to cross that threshold within capital required for loans to such the next few years. customers, and therefore the cost of their loans. There has been a wide- Two of the more significant proposed spread negative reaction to this new rules are the so-called “Basel III proposed rulemaking, with fewer Endgame,” which would among other than ten letters voicing support things introduce additional capital for the proposal out of of several requirements for operational risk, and hundred comment letters submitted would include the fluctuation in asset in response to the rulemaking. The market values reflected in “Accumu- negative response notably includes lated Other Comprehensive Income” multiple members of Congress in determining regulatory capital; and from both parties, as well as many a new long-term debt requirement for from outside the industry, who are larger banks that would require 6% of concerned about the potential adverse a bank’s risk-weighted assets to be impact on “Main Street” small- and funded with qualifying long-term debt. medium-sized businesses. 11 ANNUAL REPORT | 2023Perhaps the more problematic of to facilitate unexpected fluctuations the proposals, from our standpoint, in our balance sheet and to issue debt is a proposal that banks with over in quantities that are economically $100 billion in assets issue qualifying feasible, the actual level would be long-term debt equal to 6 percent of higher than this minimum. the bank’s risk-weighted assets. If implemented, we expect that when The cost of this debt will be much we cross the $100 billion asset greater than alternative wholesale threshold in the next three or four sources of funding, and much of that years we would be required to issue cost will ultimately be passed along incremental long-term debt in the to borrowers. We estimate it will amount of approximately $4 billion — have the effect of increasing the cost beyond our current outstanding debt of bank loans for a typical business of $0.5 billion. And because we would by around 0.2%, which would effec- need to maintain a degree of cushion tively impose a substantial new tax on COMMON EQUITY TIER 1 RATIO At December 31, 2023 Peer Banks: Strongest Quartile Well-Capitalized 14% 12% 10% 8% 6% 4% 2% 0% 10.3% Peer Banks: Weakest Quartile ADJUSTED RETURN ON TANGIBLE COMMMON EQUITY Adjusted for securities losses and substitutes net charge-offs for provision 25% 20% 15% 10% 5% 0% 12 2019 2020 2021 2022 2023 ZION Peer Top Quartile Peer Bottom Quartile borrowers from banks like Zions. This is particularly significant because regional banks provide a very large portion of the small business credit extended in the United States. As we noted in a comment letter we submit- ted on this proposal, September 30, 2023 call report data shows that, for small business and small farm loans between $100,000 and $1,000,000 in size — the types of loans these businesses use to support operations and purchase productive equipment — Zions Bancorporation’s outstand- ing volume of such loans was 34% as great as that of JPMorgan Chase; 20% as great as Bank of America; and 24% as great as Wells Fargo. That’s despite being between 2.2% to 4.6% the size of each of these banks, as measured by total assets. It’s quite a remarkable record. And while call report data is not captured for loans between $1 million and, say, $10 million, one may intuit that regional banks are very substantial providers of credit to the vast population of businesses with such borrowing needs, all of whom will feel the impact of this proposal. ZIONS BANCORPORATIONThese proposed regulations come at Proposals that would impose some a time when the regulatory agencies of these more stringent regulations have been as actively engaged in on banks with over $100 billion in establishing new rules and new assets in a “one-size-fits-all” manner expectations for the industry as come despite Congressional passage almost any time in memory. In recent in 2018 of the Economic Growth, months the Federal Reserve, Office Regulatory Relief, and Consumer of the Comptroller of the Currency, Protection Act, that raised the FDIC, Consumer Financial Protection threshold for defining a “systemically Bureau, Public Company Account- important financial institution” to ing Oversight Board, and SEC have $250 billion and mandated a “tailor- proposed new regulations, in addition ing” of regulations based on a bank’s to the capital and debt rules discussed size and complexity. above, these include the following: • Disclosures and the manage- ment of risks related to climate change. • Limitations on debit card interchange income. • The approval process for mergers and acquisitions. • Failed bank resolution planning. • The expansion of outside auditors’ duties with respect to a firm’s noncompliance with laws and regulations. • A framework for consumer- approved data-sharing. • Information gathering require- ments on small business borrowers. • A variety of proposed rules that would severely limit credit card and overdraft fees (which many in the industry expect will lead to a diminished availability of some of overdraft and card credit for lower-in- come consumers). 13 ANNUAL REPORT | 202314 ZIONS BANCORPORATIONSC AL E AND E FFIC IENCY One of the questions that has come requirements. Although the 2018 up over the course of the past year in legislation generally raised the response to these proposals, is, “Does threshold for compliance with these a bank like Zions Bancorporation need requirements to $250 billion in assets, to be much larger than $100 billion in we have continued to maintain and size to effectively compete with the even strengthen our capabilities with largest banks in the nation?” respect to many of these risk manage- ment activities. As such, based on I believe the answer is “no,” for currently proposed rules we do not several reasons. expect we will incur major additional compliance costs once we cross the First, though there are some signif- proposed $100 billion threshold. icant “up-front” costs involved in meeting the proposed expectations Second, the proposed new Basel III and requirements that come with Endgame capital rule and the long- crossing the $100 billion asset mark, term debt requirement are linear in we have already absorbed most of their impact on larger banks. There are them. When the Dodd-Frank Act was no inherent economies of scale that passed in 2010, it established $50 derive from larger size with respect billion in assets as the level beyond to these proposals. If a $100 billion which a bank was deemed to be bank with our business profile would “systemically important,” and thus require $4.5 billion in debt, a bank subject to the Enhanced Prudential twice our size would require twice as Standards contained in section 165 much debt. The same is true of the of the legislation. Those enhanced capital proposal. standards required banks subject to the rule to establish, among other This leads to the question of whether things, a comprehensive stress-test- much larger banks are inherently more ing, capital planning, and liquidity efficient. There are those who argue management and resolution planning this to be the case. In my experience 15 ANNUAL REPORT | 2023they are, for the most part, investment any size above $5 billion. And to the bankers or very large aspirational extent there is, it would appear from acquirors, neither of which have fully the data that smaller banks actually impartial agendas. In fact, when have an edge. one looks at the data, it’s hard to find evidence for much in the way of This data isn’t and shouldn’t be the economies of scale in commercial end of the argument. Notably, the banking in our country. revenues generated by the largest banks tend to be more skewed toward Using 2022 data (because it is uncon- fee income that consumes less capital taminated by the unusual impact under current rules. But those rules, as of the banking crisis in the spring of noted, are in flux and seem destined 2023) from the nation’s 181 banks to be more punitive with respect to with $5 billion or more in assets, the non-interest income than at present, amount of operating expense required by better reflecting the operating risk to generate a dollar of revenue, or the in primarily fee-generating businesses so-called “efficiency ratio,” for these which may entail significant opera- banks suggests that, if anything, tional risk but little credit risk. there may be diseconomies of scale in the industry. As shown in the chart (below), there’s not a major difference in the overall operating efficiency of banks of almost ASSET-WEIGHTED EFFICIENCY RATIOS BY BANK SIZE Fiscal year 2022 - 181 banks, $5 billion+ in assets 70.0% 60.0% 50.0% 56.4% 55.4% 55.9% 50.8% 61.6% 59.2% 63.5% 40.0% 30.0% 20.0% 10.0% 0.0% 16 $5-10B $10-25B $25-50B $50-100B $100-500B $500-1,000B >$1,000B ZIONS BANCORPORATIONFINANCIAL AND CREDIT PER FORM ANCE Zions Bancorporation’s net earnings large bank failures in March 2023. assets of $50 billion and more, the applicable to common shareholders The $90 million special assessment after-tax increase in total deposit were $648 million or $4.35 per fully is deductible against income for tax insurance expense was $96 million, or diluted share in 2023, down from purposes, but because the Tax Cuts $0.65 per share. $878 million or $5.79 per share in and Jobs Act of 2017 eliminated the 2022. Income before taxes decreased tax deductibility of regular deposit Total loans increased a moderate $266 million from last year, with the insurance premiums for banks with 3.8% during the year, to $57.8 billion, largest single factor being a $119 million increase in deposit insurance expense, to $160 million in 2023. This includes the $90 million special FDIC assessment pertaining to the two 17 ANNUAL REPORT | 2023while securities and money market bank’s deposit and other funding Customer-related noninterest income, investments decreased 15.1% to costs relative to changes in the over- which consists of fee income derived $23.2 billion. Total deposits increased night federal funds rate. The resulting from client activity, rose modestly to 4.6% to $75.0 billion. But the real measure is referred to as “deposit $620 million, while total noninterest deposit story is much more involved, beta,” and a lower beta generally income increased 7% to $677 million and managing deposit activity was produces better financial performance as a result of higher levels of dividend our primary focus during much in a rising interest rate environment. and other investment-based income. of the year. In the initial phases of the Federal Perhaps most notably, fee income Reserve’s tightening of interest rates, from retail and small business deposit In the wake of the spring bank failures, which began in early 2022, Zions’ accounts decreased 10% to $66 we saw substantial outflows — over total deposit beta was among the million, and such fees will remain under $7 billion, as previously noted — best in the industry, measuring a pressure in coming quarters as the primarily from our larger accounts. cumulative 4.7% by the fourth quarter Consumer Financial Protection Bureau We responded by rapidly adjusting of that year. The shock produced is pursuing an aggressive rulemaking deposit rates, increasing brokered by the bank failures in March 2023 agenda to dramatically limit overdraft NCO / LOANS Net loan charge-offs as a percentage of average loans 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% 2019 2020 2021 2022 2023 ZION Peer Strongest Quartile Peer Weakest Quartile and related fees. Consumer surveys indicate that overdraft services are highly desired by customers, and the severe pricing limitations proposed will likely incentivize banks to become more conservative in paying accounts into the overdraft. If there’s any good news here, it’s that Zions Bancorpora- tion tends to be much less reliant on these fees as a source of income than many larger banks. Noninterest expenses, excluding the aforementioned regulatory and deposit insurance costs, increased deposits, and utilizing reciprocal caused us to rapidly escalate deposit $100 million, or 5.5%. One of the deposit arrangements to effectively pricing, with the result that by the final primary components of the increase provide increased deposit insurance quarter of 2023, the quarter after the consisted of technology-related coverage to some of our larger clients. Federal Reserve paused its rate hikes, expenses, which rose $31 million, or As noted earlier, by the end of the year our cumulative deposit beta through 15%. This largely reflects increased we’d seen a net increase in customer the cycle was 38.7%. At the same time costs associated with our core deposits, and a decrease in brokered our net interest margin contracted systems replacement project, as the deposits from their peak in the second from a healthy 3.53% in the fourth implementation during 2023 of the quarter. This all came at the cost of quarter of 2022 to 2.91% in the fourth new deposit platform — the final higher funding costs and a reduction quarter of 2023. The net interest phase of the project — at National in our net interest margin. margin was relatively stable in the Bank of Arizona triggered the back half of 2023, and we are opti- amortization of additional capitalized As interest rates rise and fall, a mistic that it will improve somewhat costs associated with the massive measure tracked by many analysts in 2024 as securities and mortgage project. We expect to complete is the sensitivity, or elasticity, of a assets continue to reprice. the conversion of our remaining 18 ZIONS BANCORPORATION affiliate banks to the new deposit component of capital that we expect commercial real estate, or CRE, port- system in 2024. to improve by another approximately folios, and particularly with respect $900 million in 2024 and 2025. to office building exposures in light of Compensation expense increased the increasing vacancies arising from 3.2% or $40 million during the year. We were particularly pleased by the work-from-home trend. But net Almost 40% of that amount was the credit quality of our loan portfo- charge-offs in our CRE portfolio, which attributable to severance expense, lio during 2023. While we set aside includes $2 billion of loans on office as we reduced our full-time equiva- $132 million for losses on loans and buildings, were a meager $3 million, or lent staffing by a little more than 3% unfunded lending commitments, our 2 basis points, in 2023. At present we between the end of 2022 and the end actual net charge-offs were only $36 don’t anticipate exaggerated losses in of 2023 in response to diminished million during 2023, or 0.06% (6 basis this portfolio, 70% of which is located revenue outlook. Our efforts to reduce points) of average total loans and in suburban markets, and is character- staffing were facilitated in part by our leases. This performance was among ized by strong equity and a relatively winding down two national lines of business, our National Real Estate and Practice Pathways businesses. The National Real Estate business sourced commercial real estate loans, often in the form of first mortgages made under the SBA’s 504 program, from small businesses across the country. The Practice Pathways business was largely focused on financing the acquisition of dentistry and other specialized medical practices. In both cases, increased competition over time resulted in narrowing margins and returns not compatible with the capital such loans require. Our capital position strengthened in 2023, with a primary regulatory measure, the Common Equity Tier 1 the best in our peer group of larger modest $4.5 million average loan size. ratio, increasing to 10.3% from 9.8% a regional banks. While the ratio of It’s also helpful that over the course year ago. Tangible common equity as non-accrual loans increased modestly of the past decade, we’ve been very a percentage of tangible assets also from 0.27% to 0.39%, non-perform- disciplined with respect to the growth improved, from 4.3% a year ago to ing assets remain at a historically in our CRE portfolio, with growth in 5.4% at the end of 2023, as tangible low level, and the broader popula- the lowest quartile among our peer assets decreased by $2.3 billion, tion of classified loans, or loans that group, meaning that the average loan largely due to a reduction in the size show some element of weakness, in our portfolio has had more amorti- of the securities portfolio, and tangible decreased from 1.7% of total loans to zation, and thus more equity buildup, common equity grew by $804 million 1.4% during the year. than is typical in many portfolios. through retained earnings and a $420 million improvement in Accumulated Concern has been expressed by many Other Comprehensive Income — a about the risks inherent in banks’ 19 ANNUAL REPORT | 2023 AR EAS OF STRATEGIC FOCUS In recent years, we’ve been highly this past year. Since the inception of the remaining conversions in 2024. focused on further developing some the awards in 2009, only two other When complete, we believe we’ll have of our greatest strengths, which U.S. banks have consistently received among the most modern and func- include serving middle market and as many Greenwich Excellence tional core systems in the U.S. banking smaller businesses, and on building Awards as Zions Bancorporation. industry, making it much easier for our lines of business in which our focus front-line people to serve customers, on banking businesses and their Over the course of the past year, our and for customers to serve themselves owners provides a natural advan- branch and business bankers reached as we build new capabilities atop this tage, including wealth management out to over 100,000 small businesses new core platform. and capital markets. We also focus to express our appreciation for their on strengthening several fundamental relationship with the bank, and many In the wake of the bank failures in “enabling” capabilities, including risk more calls were made by our commer- 2023, we’ve become increasingly management, technology, operational cial and corporate bankers on middle focused on the value smaller, insured excellence, data and analytics, and market and larger businesses. We deposits play in providing a solid people and empowerment. have stepped up our internal banker foundation for a regional bank such development and training programs as Zions. We expect in coming years, Our strength in serving businesses in recent years, including our in addition to our focus on the small- was again demonstrated in 2023 Champions program, in which nearly and mid-sized businesses that are as Coalition Greenwich, a leading 600 of our branch-based employees a rich source of such deposits, we’ll financial services research firm that currently participate. This program also refocus on competing more annually conducts thousands of provides these front-line bankers, aggressively in the consumer market. surveys of business owners regarding most of whom spend much of their Increasingly, this market can be served their banking relationships, once again time serving small business owners, primarily through the digital tools recognized Zions Bancorporation as with additional skills and authority, and products we already have in our one of the top business banks in the including credit authority — some- arsenal, with relatively lower incre- nation. Greenwich awarded Zions 10 thing that’s especially rare for such mental cost than has been the case in “Excellence” and “Best Brand” awards bankers at larger banks today. the past. Accordingly, we’ll be piloting in its Middle Market Banking category, new approaches to serve consumers, and 16 such awards in the Small As we invest in our people, we particularly in markets and around Business Banking category, with top continue to invest in technologies branches that have not historically marks in both categories in areas that assist both our bankers and their targeted retail consumer business. such as Cash Management Product clients in making it easier and faster Capabilities and Service, Ease of to do business with Zions. As noted Doing Business, Trustworthiness, earlier, during the year, we completed Values Customer Relationships and the first of a series of three conver- Overall Satisfaction. Overall, Zions sions of our new deposit system at Bancorporation was ranked third in National Bank of Arizona. This pilot the nation in the number of Excellence conversion allowed us to refine the awards it received from Greenwich software in anticipation of completing 20 ZIONS BANCORPORATIONOUR PAST AND OUR FU TURE This past year we celebrated the The European expansion was a Douglas Malloch, an early twentieth 150th anniversary of the founding of “miss” — perhaps it will come in our century American poet (and, fittingly, Zion’s Savings Bank & Trust Company, second 150 years! And 10 percent associate editor of American Lumber- the predecessor of Zions Bank, the interest wouldn’t work very well at the man, an industry trade journal), largest affiliate in our “Collection of moment. But his wisdom with respect penned these lines: Great Banks.” Zion’s Savings Bank & to saving remains as relevant in our Trust Company opened for business times as ever. And the bank today Good timber does not grow with ease: on October 1, 1873. The great pioneer has expanded well beyond the Utah The stronger wind, the stronger trees; leader Brigham Young was its founder Territory where it was established The further sky, the greater length; and first depositor, and at the end in 1873, with branches across the The more the storm, the more of the bank’s first day of business a western United States. If the bank’s the strength. total of $5,876.20 had been depos- branches are analogous to a tree’s ited by 46 depositors. Notably, five branches, its root system consists The strength that comes from our of the original 15 depositors were of the strong — and long — rela- long history, and from building our women (and another was a women’s tionships our bankers have nurtured business the right way, making long- organization), at a time when many with millions of customers over the term investments in both people and financial institutions across the United decades, the trust they have in our technology, will serve us well for many States did not allow women to have commitment to safeguard their years to come. bank accounts. savings, and the reputation we’ve built for helping to make the communi- I’m most appreciative of the extraor- Shortly before the bank opened, ties we serve better places to live. dinary work our people performed Brigham Young wrote, “This institution during a year that presented more is a cooperative one and we think it is Zions Bancorporation’s “root system” than the usual kinds of challenges. likely to meet with favor. The interest has been strengthened through the Their commitment to our customers allowed is at the rate of ten per cent, years as we’ve managed through has been demonstrated again and per annum, compounded semiannu- both good times and bad. We’ve both again in recent years. And they’re the ally. It will be found of considerable been the beneficiary of, and contrib- reason we’ll thrive in the years ahead. advantage to those who wish to uted to, the amazing growth of the save money for the emigration of western United States over the past Thanks to each of you as shareholders their friends, as the interest is large 150 years. And we’ve weathered the for your confidence in some of the best and sums as low as $1.00 will be storms of the many bank panics of bankers in this great industry. received, which, if continually added the late nineteenth century, the Great to, will soon reach a considerable Depression, recessions, pandemics, Respectfully, amount, and the depositors will hardly and much more. miss the money. We expect in time to have branches of this bank all over the Territory, and perhaps extend it into Europe.” HARRI S SI MMO NS Chairman and CEO February 20, 2024 21 ANNUAL REPORT | 202322 ZIONS BANCORPORATIONFINANCIAL HIGHLIGHTS1(Figures in millions, except per share amounts)2023/2022Change20232022202120202019For the Year%Net interest income-3$ 2,438$ 2,520$ 2,208$ 2,216$ 2,272Noninterest income+7677632703574562Total net revenue-13,1153,1522,9112,7902,834Provision for credit losses8132122(276)41439Noninterest expense+122,0971,8781,7411,7041,742Pre-provision net revenue1-191,0591,3111,2021,1141,118Net income-256809071,129539816Net earnings applicable to common shareholders-266488781,100505782Per Common ShareNet earnings - diluted-254.355.796.793.024.16Tangible book value at year-end+2428.3022.7939.6238.4234.98Market price - end-1143.8749.1663.1643.4451.92Market price - high-2755.2075.4468.2552.4852.08Market price - low-6018.2645.2142.1223.5839.11At Year EndAssets-387,20389,54593,20081,47969,172Loans and leases, net of unearned income and fees+457,77955,65350,85153,47648,709Deposits+574,96171,65282,78969,65357,085Common equity+185,2514,4537,0237,3206,787Performance Ratios%%%%%Return on average assets0.771.011.290.711.17Return on average common equity13.416.014.97.211.2Return on average tangible common equity117.319.817.38.413.1Net interest margin3.023.062.723.153.54Net charge-offs to average loans and leases0.060.070.010.220.08Total allowance for credit losses to loans and leases outstanding1.261.141.091.741.14Capital Ratios at Year End%%%%%Common equity tier 1 capital10.39.810.210.810.2Tier 1 leverage8.37.77.28.39.2Tangible common equity to tangible assets4.93.86.57.88.5Other Selected InformationWeighted average diluted common shares outstanding-2147.8150.3160.2165.6186.5Bank common shares repurchased (in thousands)-739473,56313,4971,66623,505Dividends declared, per share+41.641.581.441.361.28Common dividend payout ratio237.8%27.3%21.1%44.6%29.0%Capital distributed as a percentage of net earnings applicable to common shareholders346%50%94%59%170%Efficiency ratio162.9%58.8%60.8%59.4%59.5%1This table includes certain non-GAAP measures. See “Non-GAAP Financial Measures” on page 23 for more information.²The common dividend payout ratio is equal to common dividends paid divided by net earnings applicable to common shareholders.3This ratio is the sum of the dollars of common dividends paid and dollars used for share repurchases for the year, divided by net earnings applicable to common shareholders.23 ANNUAL REPORT | 2023NON-GAAP FINANCIAL MEASURES(Figures in millions, except per share amounts)20232022202120202019Pre-Provision Net Revenue (PPNR)(a)Total noninterest expense (GAAP)$ 2,097$ 1,878$ 1,741$ 1,704$ 1,742LESS adjustments:Severance costs1411125Other real estate expense, net-1-1(3)Amortization of core deposit and other tangibles611-1Restructuring costs1--115Pension termination-related expense (income)--(5)28-SBIC investment success fee accrual-(1)7--FDIC special assessment90----(b)Total adjustments111243138(a-b)=(c)Adjusted noninterest expense (non-GAAP)1,9861,8761,7371,6731,704(d)Net interest income (GAAP)2,4382,5202,2082,2162,272(e)Fully taxable-equivalent adjustments4137322826(d+e)=(f)Taxable-equivalent net interest income (non-GAAP)2,4792,5572,2402,2442,298(g)Noninterest Income (GAAP)677632703574562(f+g)=(h)Combined Income (non-GAAP)3,1563,1892,9432,8182,860LESS Adjustments:Fair value and nonhedge derivative gain (loss)(4)1614(6)(9)Securities gains (losses), net4(15)7173(i)Total adjustments-1851(6)(h-i)=(j)Adjusted taxable-equivalent revenue (non-GAAP)3,1563,1882,8582,8172,866(j-c)Adjusted pre-provision net revenue (PPNR)1,1701,3121,1211,1441,162(c)/(j)Efficiency Ratio (non-GAAP)62.9%58.8%60.8%59.4%59.5%Return on Average Tangible Common EquityNet earnings applicable to common shareholders (GAAP)$ 648$ 878$ 1,100$ 505$ 782Adjustments, net of tax:Amortization of core deposit and other intangibles511--(a)Net earnings applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP)$ 653$ 879$ 1,101$ 505$ 782Average common equity (GAAP)4,8395,4727,3717,0506,965Average goodwill and intangibles(1,062)(1,022)(1,015)(1,015)(1,014)(b)Average tangible common equity (non-GAAP)$ 3,777$ 4,450$ 6,356$ 6,035$ 5,951(a/b)Return on average tangible common equity (non-GAAP)17.3%19.8%17.3%8.4%13.1%Adjusted Return on Average Tangible Common Equity(a)Net earnings applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP)$ 653$ 879$ 1,101$ 505$ 782Adjustments:Provision for credit losses132122(276)41437Net Charge-offs(36)(39)(6)(105)(37)Securities Gains/Losses(4)15(71)(6)(2)Tax impact of adjustments(19)(21)74(64)0(c)Total Adjustments7377(279)239(2)(a+c)=(d)Adjusted net earnings to common shareholders$ 726$ 956$ 822$ 744$ 780(d/b)Adjusted Return on average tangible common equity (non-GAAP)19.2%21.5%12.9%12.3%13.1%24 ZIONS BANCORPORATIONZIONS BANCORPORATION, N.A.BOARD OF DIRECTORSZIONS’ PEER GROUPEXECUTIVE VICE PRESIDENTSASB Associated Banc-CorpBOKF BOK Financial CorpCFG Citizens Financial Group, Inc.CMA Comerica IncorporatedEWBC East West Bancorp, IncFITB Fifth Third BancorpFNB FNB CorpHWC Hancock Whitney CorpHBAN Huntington Bancshares IncorporatedKEY KeyCorpMTB M&T Bank CorporationPNFP Pinnacle Financial PartnersRF Regions Financial CorporationSNV Synovus Financial Corp.WAL Western Alliance BancorporationWTFC Wintrust Financial Corp.Bruce K. Alexander CEO, Vectra Bank ColoradoA. Scott Anderson CEO, Zions BankPaul E. Burdiss Chief Financial OfficerKenneth J. Collins Enterprise Program ManagementEric Ellingsen CEO, California Bank & TrustAlan M. Forney CEO, The Commerce Bank of Washington Olga T. Hoff Retail BankingChristopher Kyriakakis Chief Risk OfficerThomas E. Laursen General CounselScott A. Law Chief Human Resources OfficerRebecca K. Robinson Wealth ManagementTerry A. Shirey CEO, Nevada State BankJennifer A. Smith Chief Technology and Operations OfficerSteven D. Stephens CEO, Amegy BankDerek Steward Chief Credit OfficerRandy R. Stewart Mortgage LendingHarris H. Simmons Chairman and Chief Executive Officer Zions BancorporationMaria Contreras-Sweet Managing Member Contreras Sweet Companies Rockway Equity PartnersGary L. Crittenden Private InvestorSuren K. Gupta President Allstate Protection and Enterprise ServicesClaire A. Huang Former Chief Marketing Officer J.P. Morgan Chase and CompanyVivian S. Lee Executive Fellow Harvard Business SchoolScott J. McLean President and Chief Operating Officer Zions BancorporationEdward F. Murphy Former Chief Financial Officer Federal Reserve Bank of New YorkStephen D. Quinn Former Managing Director and General Partner Goldman, Sachs & Co.Aaron B. Skonnard Chief Executive Officer Pluralsight, Inc.Barbara A. Yastine Former Chair, President and Chief Executive Officer Ally BankCORPORATE OFFICERSHarris H. Simmons Chairman and Chief Executive OfficerScott J. McLean President and Chief Operating OfficerEXECUTIVE VICE PRESIDENTS(CONTINUED)Lincoln Taylor Chief Audit ExecutiveMark Young CEO, National Bank of Arizona25 ANNUAL REPORT | 2023ZIONS BANCORPORATIONNEWS RELEASESEXECUTIVE OFFICESOne South Main StreetSalt Lake City, Utah 84133-1109801-844-7637Our news releases are available on our website at zionsbancorporation.com. To be added to the email distribution list, please visit zionsbancorporation.com and click on “Email Notifications.”CORPORATE INFORMATIONDIVIDEND REINVESTMENT PLANEXECUTIVE OFFICESShareholders can reinvest their cash dividends in additional shares of our common stock at the market price on the dividend payment date. Shareholders, as well as brokers and custodians who hold our common stock for clients, can obtain a prospectus of the plan on the Zions Bancorporation website at zionsbancorporation.com or by writing to:Zions BancorporationDividend Reinvestment PlanP.O. Box 30880Salt Lake City, Utah 84130-0880ANNUAL SHAREHOLDERS’ MEETINGApril 26, 2024, 1 p.m. MDTWebcast details will be provided on thezionsbancorporation.com websiteTRANSFER AGENTZions BankCorporate Trust DepartmentOne South Main Street, 12th FloorSalt Lake City, Utah 84133-1109801-844-7545 or 888-416-5176CREDIT RATINGSCredit ratings are updated regularly and may be found on the Zions Bancorporation website at zionsbancorporation.com.REGISTRARZions BankOne South Main Street, 12th FloorSalt Lake City, Utah 84133-1109AUDITORSErnst & Young LLP15 W. South TempleSuite 1800Salt Lake City, Utah 84101OTHER LISTED SECURITIESSeries A Preferred Stock – NASDAQ: ZIONPSeries G Preferred Stock – NASDAQ: ZIONOSeries I Preferred Stock – CUSIP: 989701BD8Series J Preferred Stock – CUSIP: 989701BF3NASDAQ GLOBAL SELECTMARKET SYMBOLZIONIn addition to this report, please see our website zionsbancorporation.com for our Form 10-K, proxy, and corpo-rate responsibility report.INTERNET SITESZions Bancorporation zionsbancorporation.comZions Bank zionsbank.comCalifornia Bank & Trust calbanktrust.comAmegy Bank amegybank.comNational Bank of Arizona nbarizona.comNevada State Bank nsbank.comVectra Bank Colorado vectrabank.comThe Commerce Bank of Washington tcbwa.comThe Commerce Bank of Oregon tcboregon.comThis document may contain statements that could be considered “forward looking.” Readers should review the forward-looking statement disclaimer of Zions’ Annual Report on Form 10-K, which can be found on the website at zionsbancorporation.com and applies equally to this document. Certain financial measures containing descriptive words such as “core” or “adjusted” are subject to the Non-GAAP Financial Measures table, which can be found on page 23. SELECTED INDEX MEMBERSHIPSS&P Midcap 400S&P Global 1200KBW BankNASDAQ Financial 100INVESTOR RELATIONSFor financial information about the bank,analysts, investors and news mediarepresentatives should contact:Shannon Drage801-844-7637investor@zionsbancorp.comO N E S O U T H M A I N S T R E E T, S A LT L A K E C I T Y, U TA H 8 4 1 3 3 | Z I O N S B A N C O R P O R AT I O N . C O M 

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